1. The "sponsored post" about Sims3 on the mock-up was an actual story that appeared on Digg in February. It got 606 diggs and 110 comments. I wonder whether the same post would show comparable numbers if it had been an ad, as mocked up. In case you are wondering, all other stories on this screenshot have been made up.
2. I really like how the format fits the primary user behavior on the site -- reading and commenting on news. Techmeme's "sponsored RSS feeds" format is similar. I wrote (and someone else has commented) about this before: "Content in different media is consumed in different ways. Ads are content. To work in a different medium, ad formats should reflect the medium's particularities."
3. Advertisers will have to become content producers. That means headlines, not slogans. Not every brand produces diggable content.
4. Finally, a legit (as opposed to otherwise) mechanism to pay your way to Digg's front page.
5. What happens if someone else -- someone with a large network of Digg friends -- submits the same news with a link to a different page?
6. As one Digg commenter puts it, "Most ads will probably get buried anyway. Much like this comment. Cue the [bury] brigade." Which means "the more an ad is buried, the more the advertiser is charged, pricing it out of the system."
7. Back to #4: If before, underground networks of diggers like Subvert and Submit charged money to promote someone's story to the front page, now they will charge money to digg ads, if the math works for the advertisers.
8. Brands favorited by powerful well-connected diggers (say, Apple) will pay less then brands that are not liked as much (say, Microsoft).
9. For the reasons above, I think it would work better if Digg tacked its voting and commenting mechanism onto the more traditionally placed ads instead of sticking the ads into the content stream. I'd keep the rest of the social functionality, too, like letting my friends see if I dugg an ad.
10. On the mock-up, there's no username associated with the Sims3 ad. I'd actually let people placing ads create user-like accounts so that they could build their own social networks within the site and earn reputation points.